Yellow settles federal claim it overcharged pentagon

The freight carrier says it agreed to pay $6.8 million to resolve a claim it overcharged the Defense Department by millions of dollars by inflating shipment weights.

Yellow, one of the largest trucking companies in the U.S., didn’t admit liability in the settlement, which addressed charges involving shipments from 2005 to 2013. – PHOTO: YELLOW CORP.

Trucking company Yellow Corp. agreed to pay $6.8 million to settle a federal claim that the company overcharged the Defense Department by millions of dollars over several years by inflating the weights of goods it carried for the Pentagon.

Overland Park, Kan.-based Yellow, one of the largest trucking companies in the U.S., didn’t admit liability in the settlement, which addressed charges involving shipments from 2005 to 2013.

The Justice Department sued Yellow, then known as YRC Worldwide, in 2018, alleging that workers for three of the company’s freight-carrying units reweighed thousands of shipments and didn’t disclose the results when those weights came in under the original estimate.

Yellow said the rules involving the shipments were ambiguous and complex and that it complied with them at the time. The settlement concludes the legal dispute with the government, which is one of its largest customers, Yellow said.

“We remain confident that we complied with the then-existing rules and our contractual obligations,” Leah Dawson, Yellow’s executive vice president and general counsel, said in a statement. “While we believe we had strong defenses, we decided, in the best interests of all parties, to resolve this matter for a small fraction of the amount originally demanded.”

The Defense Department declined to comment. The Justice Department didn’t respond to a request for comment.

The agreement resolves one of the issues hanging over the carrier in recent years as the less-than-truckload company has sought to repair a balance sheet weighed down by debt.

Yellow has lagged behind its rivals in the less-than-truckload market, in which operators carry shipments from multiple customers, even as strong shipping demand during the pandemic has pushed more freight through distribution networks. Yellow reported a $54.2 million net loss for 2021, excluding the impact of a pension adjustment, as overall operating revenue rose 13.5% from the year before to $5.1 billion. The company’s outstanding debt increased to more than $1.6 billion as of December 31, an increase of $330.5 million compared with a year earlier.

Yellow received a $700 million loan under the federal pandemic relief program in 2020, an action federal officials said supported national security because of Yellow’s work for the Pentagon.

A Democratic-led House oversight committee began investigating whether the loan was issued improperly, and the panel’s chair said last year that documents showed that Trump administration officials “directly engaged with Yellow and its representatives regarding the company’s application” and “took steps to communicate with Treasury officials” about the loan.

Yellow is committed to fully repaying the loan, a company spokesperson reiterated this week.

Write to Lydia O’Neal at lydia.oneal@wsj.com